Analysis business Canalys says spending on cloud infrastructure services in mainland China grew by 20% year-on-year in the first quarter of 2024, reaching USD9.2 billion.
The leading trio in China’s cloud market, Alibaba Cloud, Huawei Cloud and Tencent Cloud, maintained their dominance, collectively growing 22% and capturing 72% of the total market. However, this represents a 2% decrease from last quarter.
Canalys says the Chinese cloud market is entering a new phase of intense price competition. Cloud services offered by telcos, led by China Telecom, are gradually capturing share. Cloud investments to support AI applications and significant price reductions by the top cloud providers have stimulated customer spending on the cloud.
Leading cloud vendors have effectively driven business growth by attracting customers through aggressive pricing strategies. In April 2024, Alibaba Cloud announced price reductions for its core products worldwide, followed by further cuts for its AI foundation model in May 2024. Tencent Cloud quickly followed suit, announcing significant price reductions for its foundation models in May.
“To maintain higher profitability in an intensely competitive market, fostering a robust partner ecosystem is indispensable,” said Canalys Analyst Yi Zhang. “Partnerships can enrich customer offerings with value-added services, maintaining competitive pricing strategies while enhancing overall customer satisfaction. Simultaneously, partnerships enhance market differentiation while mitigating risks through optimized operations and flexible financial support.”
Both Huawei Cloud and Tencent Cloud introduced AI-focused partner programs, seeking to leverage their partner ecosystems to drive AI adoption and speed up time to market. During Q1 2024, cloud revenue generated through partners accounted for 26% of the total Chinese market, and this share should increase further.
Alibaba Cloud retained the number one position in the Chinese cloud market in Q1 2024, commanding a 37% market share. During the quarter, it increased its focus on public cloud adoption while reducing private cloud integration projects. This move aims to limit customised projects and focus on more scalable opportunities. Following the successful implementation of product price reductions in China, in April 2024, Alibaba Cloud announced substantial price cuts for its core products in 13 global regions, with an average decrease of 23%.
In May 2024, Alibaba Cloud introduced further price reductions, offering its foundational model for free for a limited time to lower entry barriers and attract more customers. Regarding capital expenditure, Alibaba Cloud revealed in May that it will establish new data centres in five countries, South Korea, Malaysia, the Philippines, Thailand and Mexico, to accelerate its global expansion efforts.
Huawei Cloud remained the second-largest cloud vendor in Mainland China in Q1 2024, holding a market share of 19%. Cloud continued to strengthen its robust partner ecosystem. In April 2024, Huawei Cloud hosted the APAC Partner Connection Summit, which marked the launch of the Huawei Cloud AI Services APAC Partner Ecosystem. This initiative included collaborations with prominent partners, including iFLYTEK, PwC and KBQuest. Furthermore, Huawei Cloud committed to providing additional incentives of 15% to 25% to support partners in enhancing their professional services and sales capabilities, thereby deepening the focus on AI products and solutions within specific market segments.
Tencent Cloud has secured a 16% market share and ranked third in Q1 2024. In May 2024, Tencent Cloud introduced three categories of large model tools – knowledge engine, image and video – designed to facilitate enterprises’ development of AI applications. Concurrently, it officially launched the Generative AI Ecosystem Plan, partnering with 17 companies to expand the application scenarios of its AI foundational models. To keep pace with Alibaba Cloud’s price reduction strategy, Tencent Cloud announced significant price cuts to its foundational models in May, with reductions of up to 70%, closely following Alibaba Cloud’s lead.
